*

China retail data badly misses forecasts

*

European PMIs still in contraction, but above previous

month

*

Fed seen cutting 25bps, focus on future easing plans

*

BOE, BOJ and Norges seen on hold, Sweden to cut

*

Rising Treasury yields underpin dollar, pressure stocks

(Updates after European morning trading)

By Wayne Cole and Alun John

SYDNEY/LONDON, Dec 16 (Reuters) - Shares around the

world nudged lower on Monday on soft economic numbers from China

and Europe and as surging bond yields challenged equity

valuations, kicking off a week packed with central bank meetings

and major economic data.

Figures from China showed retail sales rose just 3.0% in

November, compared with a year earlier, well below market

forecasts of 4.6%, in a sign much more aggressive stimulus was

needed. Industrial production was much as expected, while house

prices were still falling, though at a slower pace.

China's blue chip index eased 0.5%, having dropped

more than 2% last Friday.

Over the weekend, an official at China's central bank said

it had room to further cut the reserve requirement ratio,

dictating how much cash banks must hold as reserves, though

credit numbers out last week showed past easing had done little

to boost borrowing.

European stocks also nudged down, off 0.36%, as

investors processed data that showed euro zone business activity

contracted in December, but by less than it did the previous

month.

That left MSCI's world share index a

fraction lower, though U.S. share futures ticked up.

"There are three things to watch this week. First, the

economic signals, and we don't have a change of pattern - Europe

is a bit underwhelming and we continue to see U.S.

outperformance," said Samy Chaar, chief economist at Lombard

Odier.

"Then there is the Fed. Like consensus we expect a cut this

week, but we expect a slightly higher terminal rate, and the

final thing we are monitoring is all the risks that relate to

politics or geopolitics - we continue to watch the situation in

France and South Korea."

Ratings agency Moody's unexpectedly downgraded France on

Friday a few hours after French President Emmanuel Macron

appointed veteran centrist Francois Bayrou as the country's

fourth prime minister in a year.

French government bonds slightly underperformed German bunds

in early trading Monday.

Political uncertainty was also clouding South Korea, where

the finance ministry promised to support markets after the

impeachment of President Yoon Suk Yeol. Stocks in Seoul

and the won were both down slightly on Monday but in line

with Asian peers.

EYEING CENTRAL BANKS

The big events of the week are central bank meetings, and

markets show rate-setters in the United States and Sweden are

expected to cut, while policymakers in Japan, Britain and Norway

are seen holding steady.

The Federal Reserve will lead the pack on Wednesday with

markets pricing a 96% probability it will cut rates by 25 basis

points to a new range of 4.25% to 4.50%.

More important will be any guidance on future easing,

including the "dot plot" forecasts of Fed members for rates over

the next couple of years.

Investors have been steadily scaling back expectations of

how far rates may fall, in part reflecting solid economic news

and speculation President-elect Donald Trump's plans for tax

cuts and tariffs would expand government borrowing while putting

upward pressure on inflation.

Futures imply only two more cuts next year and rates

bottoming out at around 3.80%, much higher than just a few

months ago. That outlook took a heavy toll on the Treasury

market last week, where longer-dated yields recorded their

largest weekly rise this year.

Yields on 10-year notes were lower at 4.36%, on

Monday having climbed 24 basis points last week alone, and

threatening to breach a major bear target at 4.50%.

Bitcoin was also in the spotlight, surging to a

record high above $106,000 as it extended gains on bets Trump's

return will usher in a cryptocurrency-friendly regulatory

environment.

In currency markets, the dollar has been underpinned by

rising yields. That has put the squeeze on several emerging

market currencies, forcing intervention in some cases.

The dollar also gained on the yen on Monday to 154

, having jumped almost 2.5% last week, while the euro

looked wobbly at $1.04962.

Gold was at $2,657 an ounce, and oil prices came off

three-week highs, having been supported by expectations that

additional sanctions on Russia and Iran could tighten supplies.

Brent futures were down 54 cents at $73.95 a barrel.